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Monday, August 15, 2022
Trading

Dollar lower ahead of U.S. inflation data

U.S. inflation data

The dollar is moving towards its seventh weekly rise in a row ahead of the U.S. data, including the CPI due later in the day

The dollar was lower on Friday morning in Asia ahead of U.S. inflation data that could provide clues as to when the Federal Reserve will hike interest rates. The Chinese yuan also recorded its sharpest decline in months after authorities moved to halt its recent rally.

The U.S. Dollar Index edged down 0.07% to 96.183 by 3:14 AM GMT. The USD/CNY pair inched down 0.15% to 6.3678 and the USD/JPY pair edged up 0.06% to 113.50.

The AUD/USD pair edged up 0.07% to 0.7154 and the NZD/USD pair edge up 0.10% to 0.6800.

The U.S. currency is moving towards its seventh weekly rise in a row ahead of the U.S. data, including the consumer price index (CPI) due later in the day.

Inflation is going to accelerate, said RBC Capital Markets chief U.S. economist Tom Porcelli, who predicts that the annual pace will rise to push near 7% in early 2022.

As a result, we think that combination means a hike in March 2022 is very possible. The market is pricing in about a 40% chance of that, but we now think it’s a bit higher. It’s probably closer to a coin flip now, he added.

Investors also await policy decisions from the Fed, European Central Bank (ECB), Bank of England (BoE), and Bank of Japan (BoJ) next week.

Judging by the way the dollar is trading I’d argue traders are positioning for a higher CPI print which cements a view that the Fed will increase the pace of tapering its quantitative easing program, Pepperstone head of research Chris Weston told Reuters.

He said: While form suggests we get a beat, we obviously can’t dismiss a poor number, and of course an inline print. I think if we get 6.4% or below then AUD/USD should fly.

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